Busted! Don’t Believe These Mortgage Myths!
Working with an experienced mortgage broker is a great plan when buying a house. They can help pull your credit score, achieve a pre-approval, and close your mortgage in no time, so you can move into your dream home. However, misconceptions about these professionals have misled many individuals into believing that hiring a mortgage broker is not a good idea.
To help you steer clear of the misconceptions, Corina Murphy Mortgages - Premiere Mortgage Centre has debunked three of the most widely believed myths about mortgages.
Myth 1: You must only use a mortgage broker if you have bad credit.
Mortgage brokers provide expert advice, tailor solutions to suit their clients’ financial goals, and stay in touch even after the mortgage is closed. Besides this, they source funds from various lenders, saving home buyers valuable time and thousands of dollars.
At Corina Murphy Mortgages - Premiere Mortgage Centre, we have access to over thirty lenders, including banks, monoline lenders (lenders that only deal in mortgages), credit unions, commercial mortgages, and private mortgage financing options to help all kinds of borrowers.
Myth 2: You have to pay a fee to use a mortgage broker.
Mortgage brokers work pro bono until the mortgage closes, and then they get paid a fee by the lending institution. But this is the case for homebuyers with good credit, who qualify under normal lending guidelines. They will usually receive free expertise.
On the other hand, if the homebuyer has bruised credit or other issues that do not fit within normal lending guidelines, there may be a fee charged by the lender and mortgage brokerage. Depending on the complexity of your situation and the amount of work involved, a fee would be applicable for hard to place mortgage transactions. A good mortgage broker will advise you on the approximate costs in advance.
Keep in mind that there is a lot of work involved in completing a pre-qualification and any associated costs will be shouldered by the broker and the lender regardless of whether you use their services. They work hard on your behalf so being open and honest with your broker is a best practice.
Myth 3: Mortgage penalties are all calculated the same.
This is incorrect. The type of mortgage a borrower has can make a big difference in their penalty amount. Factors such as variable-rate mortgages, fixed mortgages, and low rate basic mortgages will determine the penalty amount applicable. Similarly, the type of mortgage lender they use impacts their penalty amount. Banks typically are among the highest in penalty calculations in the industry. This is due to the method in which they calculate penalties. On the other hand, Monoline lenders (lenders that only offer mortgages) calculate their penalties very differently, which is to the favor of the client.
The penalty is usually calculated in one of the following three ways:
a. A three-month interest penalty
b. An interest rate differential penalty
c. if you took a Low Rate Special Mortgage that had restrictions, then the penalty is commonly calculated using a rate of 2.75% to 3.00% on the balance of your mortgage
It is extremely important to know the difference between all three penalties. This is because saving $5.00 a month on a lower interest rate mortgage or a fixed-rate mortgage could result in a hefty penalty if you needed to break that mortgage or refinance it before the end of the contract date.
For example, Lender A (a typical bank) could have a penalty of $ 20,000, whereas a Monoline lender’s penalty would be $ 3,500 for a mortgage at the same interest rate, term, and amount. As a result, it is vital to know these mortgage penalty differences.
If you’re looking to steer clear of more mortgage myths like these, reach out to Corina Murphy Mortgages - Premiere Mortgage Centre today! As a leading mortgage broker in Mississauga, ON, we will help you with your mortgage financing needs and won’t charge a fee. We offer private mortgages, commercial mortgages, home equity loans, and a lot more services to our clients across Oakville, Milton, Caledon, Vaughan, Halton Hills, Hamilton, St.Catharines, Streetsville, Meadowvale, and Puslinch, to name just a few places.